Misunderstanding a Memorandum of Understanding

Donald Trump answering questions on the negotiations for a trade agreement between the US and China:

I think the MOU is going to be very short term.

I don’t like MOU’s because they don’t mean anything. To me they don’t mean anything. I think you’re better off just going into a document. I was never a fan of an MOU.

He was then contradicted by his top trade representative Robert Lighthizer:

A memorandum of understanding is a binding agreement between two people.

This was in front of  a Chinese delegation.

They obviously have different ideas about how to negotiate trade deals. They may both be wrong.

Investipedia: Memorandum of Understanding:

“A memorandum of understanding (MOU) is a nonbinding agreement between two or more parties outlining the terms and details of an understanding, including each parties’ requirements and responsibilities. An MOU is often the first stage in the formation of a formal contract.”

A memorandum of understanding (MOU) is not legally binding but is viewed as a serious document by the law. In the United States, an MOU is the same as a letter of intent, which is a nonbinding agreement stating a binding agreement will soon follow. MOUs are most often used as part of multinational international relations because, unlike treaties, they are quick and can be kept secret.

An MOU signals a legal contract is imminent. However, an MOU itself is not legally defensible but should still clearly outline specific points of an understanding. An MOU should describe the parties are, the project on which they are agreeing, the scope of the document, each parties’ roles and responsibilities, and more. An MOU can help two parties move in the right direction toward an agreement.

An MOU, while not an enforceable document, still holds a lot of power because of the time, energy and resources needed to draft an effective and fair document. An MOU forces the participating parties to reach a semblance of a mutual understanding, and, in the process, the two sides naturally mediate and figure out what is most important in moving toward an eventual future agreement that benefits both sides.

The misunderstanding about an MOU:

There were mixed responses, from:

Much as I hate to say this, but Trump is right. Any MoU I have negotiated included clauses that made it clear it was non-binding. It’s not a contract. Poor choice of a Trade Rep who doesn’t understand this though. The below is the official UK government definition.

To:

Jesus Christ Dom…. this is Government not commercial law…. MOUs are how trade deals are made functional. They bind countries.

It doesn’t surprise me that Trump gives no weight to an MOU – he dumps full trade agreements he doesn’t like, and starts trade wars as a way of forcing changes to trade practices and regulations.

The understanding from this is that anything goes with Trump, regardless of normal practice on negotiating trade agreements.

I don’t think that Trump’s rubbishing of the value of an MOU will give the Chinese any confidence about trade negotiations, and will negate the value of any Memorandums of Understanding.